trust structure

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newby1
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@newby1
Join Date: 2010
Post Count: 7
January 20, 2010 - 12:30 am
hi guys
im very new to the property investing world and very keen to learn from more experienced investors , i have lots of questions but my first and most relevent at this stage is regarding borrowing capacity thru a trust structure
in steves book he mentions that u can borrow using a trust and once ur traditional servicability means have run dry in your first trust ,u can simply start another trust and start your borrowings all again , this seems to good to be true
can anybody support or appose this ? ( i am talking about page 172 -175 of steves book)
thanks newby
Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
January 20, 2010 - 2:17 am
Hi newby
Wow Steve new book must have been popular this Xmas as this has been the most asked question on the forum over the last 8 weeks.
Simple answer is NO forming a new Trust does not increase your serviceability one bit.
Do a search on the subject and you will see the various comments.
Richard Taylor | Australia's leading private lender
newby1
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@newby1
Join Date: 2010
Post Count: 7
January 20, 2010 - 2:29 am
thanks mate much appreciated , and sorry should have dome some research first huh !
may i ask another question tho , im only a young fella ( just turned 21) an im still an apprentice , so my earning posibility is temporary limited , but even when i am qualified its still not going to be that high , say that it was 70k pa , does this mean i am stuck with only being able to service or guarantee a loaned amount relevent to me earning 70k forever ?? or is there a magical way around this problem?
thanks newby
Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
January 20, 2010 - 2:55 am
Hi Newby
Sorry wasnt having a go at you at all had just answered the same question about a dozen times so thought it was easier for you read some past comments.
Income is important but deposit and equity are equally so.
On the income side you will also receive rent when you purchase an investment property so this helps increase your borrowing capacity.
Loans are assessed these days with a combination of credit scoring and then DSR or income suplus testing.
There are many ways to get started with a deposit and the rest is just a matter of structuring correctly and maximising your equity as you go along.
Richard Taylor | Australia's leading private lender
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
January 20, 2010 - 2:56 am
It is a popular question these days.
Newby, don't forget you will be getting rental income too. But essentially you are right, borrowing capacity will depend on your capacity to service the loans – or to demonstrate serviceability (people can often service much more than the bank thinks they can).
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
newby1
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@newby1
Join Date: 2010
Post Count: 7
January 20, 2010 - 3:22 am
thanks guys for the helpful and also speedy replies
the reality of my situation is that i have just purchased my first investment but atm it can not be realized as an investment because i used the FHOG . so i have 6 months before it can become a true investment sp tp speak.
with the FHOG and my own personal savings i was able to put up 50k deposit , so this may be a really stupid question but that would mean i would have roughly 50k equity ?
but to throw a spanner in the works , this house has not actualy been built yet , so obviously i dont actualy have any accesable equity yet ?or do i ? may also be a silly question but it seems as tho there is lots of strange loop holes in the property game so i thought i would ask .
the reason i ask is because i want to keep making progress , and am wondering were i stand atm , and if opening a trust structure , with a company as trustee an me as a director is a good way forward for someone like myself (single no kids) ?
another thing i have to concider is if i should partner with my parents in the trust …..
sorry for so many questions haha
cheers newby
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
January 20, 2010 - 3:29 am
Equity = Value – loans.
If your house hasn't been built yet, then there is no value. So you will have to wait.
Even after being built you may not be able to utlise the equity. Banks will only lend a percent of a property.
Having a trust is a good idea, but it will not help at all in the borrowing of money. Probably your biggest obstacle will be coming up with the deposits rather than serviceability.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
newby1
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@newby1
Join Date: 2010
Post Count: 7
January 20, 2010 - 4:02 am
thanks terry
would u recomend having a joint trust with my parents or would effect each others borrowing power in a negative way ?
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
January 20, 2010 - 4:06 am
No, just go on your own. Jointly borrowing will hurt serviceability later. Also beware with adding or naming or distributing to parents from a trust as it can affect centrelink entitlements.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
newby1
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@newby1
Join Date: 2010
Post Count: 7
January 20, 2010 - 4:11 am
thanks alot terry , hopefully i can return the favour and help you out with something one day , thatl be the day tho ….